Businesses in Scotland continue to face a tough economic climate with levels of early financial distress rising by almost a third in the first three months of 2018 compared with the same period last year, a recovery specialist company has claimed .

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This is a year on year rise of 33% (the same as the UK-wide figure) and equates to 6,312 more businesses in the country being affected by this type of distress which includes those with minor decrees against them and those displaying a marked deterioration in key financial ratios.

However, quarter on quarter, it appears that ‘significant’ distress in both Scotland and across the UK decreased by 3%.

In terms of the more serious ‘critical’ distress, which refers to businesses that have had winding up petitions or decrees totalling more than £5,000 against them, the latest Red Flag Alert data shows a year on year fall of 51% in Scotland, compared with a drop of just 30% across the UK as a whole.

Looking at instances of ‘critical’ distress in Scotland quarter on quarter, there was a drop of 25%, significantly better than the 14% rise across the UK.

Year on year ‘significant’ distress in Scotland affected many sectors with the worst hit being telecommunications (57% rise); professional services (50%); leisure and culture (47%); and financial services (46%). The strongest performing sectors were: hotels and accommodation, up by just 8%; bars and restaurants (15%); food and drink retail (16%); and printing (17%).

Ken Pattullo, head of Begbies Traynor in Scotland, said: “To see such a dramatic rise in significant distress since last year, both in Scotland and across the whole of the UK, is extremely worrying.

"Amid continuing concerns about the impact of Brexit and falling confidence among businesses and consumers, the prospects for the British economy in the year ahead look far from promising.

“With economic growth predicted to continue to lag behind that of the other G7 nations in 2018, there seems little hope of a change in fortunes and directors would be well advised to keep a close eye on cash flow and seek professional help at the first signs of trouble when the widest choice of options will be open to them.”

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Begbies Traynor Group is a listed business recovery, financial advisory and property services consultancy, providing services nationally from a comprehensive network of UK locations through two complementary operating divisions.